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Bearish Drivers

· Continued soft residential and gas for power consumption.
· Strong production in Norway, particularly, considering possibly Troll’s maximized output.
· Robust storage refilling trajectory.

Bullish Drivers

· Unplanned events impacting global LNG supply, potential hurricanes are a notable concern.
· Norwegian maintenance extensions or unplanned events.
· Additional UKCS domestic production outages.

In July, prices have generally been declining, with occasional volatility due to Hurricane Beryl’s impact on Freeport. Bearish fundamentals, such as increased Norwegian supply and weak demand, have supported ongoing storage replenishment.

In August, fundamentals are expected to be bearish and should continue to drive a steady decline in prices. Demand remains relatively soft, with UK domestic demand slightly lower month-on-month and stable compared to August 2023. Gas demand for power generation is weak in both the UK and Northwest Europe (NWE), largely due to strong renewable energy production, increased hydropower, and higher availability of French and UK nuclear power. Overall, NWE gas consumption is expected to be over 100 GWh/day lower than in August 2023, with only a slight year-on-year increase in industrial consumption.

On the supply side, Norwegian production is forecasted to decrease month-on-month, following a strong output of 335 mcm/day in July due to minimal maintenance. Planned maintenance will resume in mid-August, leading to a decline to 302 mcm/day, though this remains higher than the 285 mcm/day recorded in August 2023. Strong UK exports to the Continent (48 mcm/day) are expected to continue due to an oversupplied UK system, with the NBP maintaining a discount to the TTF of around 5p/th.

LNG sendout remains low as European storage levels are comfortable, and Asia continues to dominate demand due to heat waves, increased renewable energy, low LNG prices, and higher coal capacity, reducing demand from China and Japan. Despite higher regasification capacity in NWE, no increase in LNG sendout is forecast for next month. August’s NWE LNG sendout is expected to be slightly lower than July and 36 mcm/day below August 2023 levels.

Based on updated balances, August storage injections are projected to remain steady compared to July, slightly surpassing last August’s rate. Storages are expected to end August at 519 TWh (92%), 18 TWh below last year. If mild conditions prevail, NWE stocks could reach 100% fullness by November 1. However, there is still a bullish price risk for WIN-24, with a potential for storages to end the upcoming heating season at 18% fullness.

In the short term, risks include unplanned maintenance in Norway and the UK or any events impacting global LNG supply, which could disrupt the storage refilling process. Prices are expected to hover around €30/MWh, remaining sensitive to changes in supply and demand fundamentals until storage approaches full capacity.

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